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  1. Definitions. The International Monetary Fund defines a global recession as "a decline in annual per‑capita real World GDP (purchasing power parity weighted), backed up by a decline or worsening for one or more of the seven other global macroeconomic indicators: Industrial production, trade, capital flows, oil consumption, unemployment rate, per‑capita investment, and per‑capita consumption".

    • Definitions

      The International Monetary Fund defines a global recession...

    • Overview

      Informally, a national recession is a period of declining...

  2. The recession data for the overall G20-zone (representing 85% of all GWP), depict that the Great Recession existed as a global recession throughout Q3‑2008 until Q1‑2009. Subsequent follow-up recessions in 2010‑2013 were confined to Belize, El Salvador, Paraguay, Jamaica, Japan, Taiwan, New Zealand and 24 out of 50 European countries ...

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  4. en.wikipedia.org › wiki › RecessionRecession - Wikipedia

    • Definition
    • Attributes
    • Predictors
    • Government Responses
    • Keynes on Government Response
    • Stock Market
    • Politics
    • Consequences
    • History
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    In a 1974 The New York Times article, Commissioner of the Bureau of Labor Statistics Julius Shiskin suggested several rules of thumb for defining a recession, one of which was two consecutive quarters of negative GDP growth.In time, the other rules of thumb were forgotten. Some economists prefer a definition of a 1.5-2 percentage points rise in unemployment within 12 months. In the United States, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER, a private economic research organization, defines an economic recession as: "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales".Almost universally, academics, economists, policy makers, and businesses refer to the determination by the NBER for the precise dating of a recession's on...

    A recession has many attributes that can occur simultaneously and includes declines in component measures of economic activity (GDP) such as consumption, investment, government spending, and net export activity. These summary measures reflect underlying drivers such as employment levels and skills, household savings rates, corporate investment decisions, interest rates, demographics, and government policies. Economist Richard C. Koo wrote that under ideal conditions, a country's economy should have the household sector as net savers and the corporate sector as net borrowers, with the government budget nearly balanced and net exports near zero.When these relationships become imbalanced, recession can develop within the country or create pressure for recession in another country. Policy responses are often designed to drive the economy back towards this ideal state of balance. A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depress...

    The U.S. Conference Board's Present Situation Index year-over-year change turns negative by more than 15 points before a recession. The U.S. Conference Board Leading Economic Indicator year-over-year change turns negative before a recession. When the CFNAI Diffusion Index drops below the value of -0.35, then there is an increased probabilityof the beginning a recession. Usually, the signal happens in the three months of the recession. The CFNAI Diffusion Index signal tends to happen about one month before a related signal by the CFNAI-MA3 (3-month moving average) drops below the -0.7 level. The CFNAI-MA3 correctly identified the 7 recessions between March 1967–August 2019, while triggering only 2 false alarms. Except for the above, there are no known completely reliable predictors, but the following are considered possible predictors. 1. The Federal Reserve Bank of Chicago posts updates of the Brave-Butters-Kelley Indexes (BBKI). 2. The Federal Reserve Bank of St. Louis posts the We...

    Most mainstream economists believe that recessions are caused by inadequate aggregate demand in the economy, and favor the use of expansionary macroeconomic policy during recessions. Strategies favored for moving an economy out of a recession vary depending on which economic school the policymakers follow. Monetarists would favor the use of expansionary monetary policy, while Keynesian economists may advocate increased government spending to spark economic growth. Supply-side economists may suggest tax cuts to promote business capital investment. When interest rates reach the boundary of an interest rate of zero percent (zero interest-rate policy) conventional monetary policy can no longer be used and government must use other measures to stimulate recovery. Keynesians argue that fiscal policy—tax cuts or increased government spending—works when monetary policy fails. Spending is more effective because of its larger multiplierbut tax cuts take effect faster. For example, Paul Krugma...

    John Maynard Keynesbelieved that government institutions could stimulate aggregate demand in a crisis. "Keynes showed that if somehow the level of aggregate demand could be triggered, possibly by the government printing currency notes to employ people to dig holes and fill them up, the wages that would be paid out would resuscitate the economy by generating successive rounds of demand through the multiplier process"

    Some recessions have been anticipated by the stock market declines. In Stocks for the Long Run, Siegel mentions that since 1948, ten recessions were preceded by a stock market decline, by a lead time of 0 to 13 months (average 5.7 months), while ten stock market declines of greater than 10% in the Dow Jones Industrial Averagewere not followed by a recession. The real-estate market also usually weakens before a recession.However real-estate declines can last much longer than recessions. Since the business cycle is very hard to predict, Siegel argues that it is not possible to take advantage of economic cycles for timing investments. Even the National Bureau of Economic Research(NBER) takes a few months to determine if a peak or trough has occurred in the US. During an economic decline, high-yield stocks such as fast-moving consumer goods, pharmaceuticals, and tobacco tend to hold up better. However, when the economy starts to recover and the bottom of the market has passed, growth st...

    Generally, an administration gets credit or blame for the state of economy during its time. This has caused disagreements about on how it actually started.In an economic cycle, a downturn can be considered a consequence of an expansion reaching an unsustainable state, and is corrected by a brief decline. Thus it is not easy to isolate the causes of specific phases of the cycle. The 1981 recession is thought to have been caused by the tight-money policy adopted by Paul Volcker, chairman of the Federal Reserve Board, before Ronald Reagan took office. Reagan supported that policy. Economist Walter Heller, chairman of the Council of Economic Advisers in the 1960s, said that "I call it a Reagan-Volcker-Carter recession." The resulting taming of inflation did, however, set the stage for a robust growth period during Reagan's presidency.[citation needed] Economists usually teach that to some degree recession is unavoidable, and its causes are not well understood.

    Unemployment

    Unemployment is particularly high during a recession. Many economists working within the neoclassical paradigm argue that there is a natural rate of unemployment which, when subtracted from the actual rate of unemployment, can be used to calculate the negative GDP gap during a recession. In other words, unemployment never reaches 0 percent, and thus is not a negative indicator of the health of an economy unless above the "natural rate", in which case it corresponds directly to a loss in the g...

    Business

    Productivity tends to fall in the early stages of a recession, then rises again as weaker firms close. The variation in profitability between firms rises sharply. The fall in productivity could also be attributed to several macro-economic factors, such as the loss in productivity observed across UK due to Brexit, which may create a mini-recession in the region. Global epidemics, such as COVID-19, could be another example, since they disrupt the global supply chain or prevent movement of goods...

    Social effects

    The living standards of people dependent on wages and salaries are not more affected by recessions than those who rely on fixed incomes or welfare benefits. The loss of a job is known to have a negative impact on the stability of families, and individuals' health and well-being. Fixed income benefits receive small cuts which make it tougher to survive.

    Global

    According to the International Monetary Fund (IMF), "Global recessions seem to occur over a cycle lasting between eight and 10 years." The IMF takes many factors into account when defining a global recession. Until April 2009, IMF several times communicated to the press, that a global annual real GDP growth of 3.0 percent or less in their view was "...equivalent to a global recession".By this measure, six periods since 1970 qualify: 1974–1975, 1980–1983, 1990–1993, 1998, 2001–2002, and 2008–2...

    Australia

    The worst recession Australia has ever suffered happened in the beginning of the 1930s. As a result of late 1920s profit issues in agriculture and cutbacks, 1931-1932 saw Australia's biggest recession in its entire history. It fared better than other nations, that underwent depressions, but their poor economic states influenced Australia's as well, that depended on them for export, as well as foreign investments. The nation also benefited from bigger productivity in manufacturing, facilitated...

    United Kingdom

    The most recent recession to affect the United Kingdom was the 2020 recession attributed to the COVID‑19 global pandemic, the first recession since the late-2000s recession.

    Moore, Geoffrey H. (2002). "Recessions". In David R. Henderson (ed.). Concise Encyclopedia of Economics (1st ed.). Library of Economics and Liberty. OCLC 317650570, 50016270, 163149563
  5. The COVID-19 recession is a global economic recession caused by the COVID-19 pandemic. The recession began in most countries in February 2020. After a year of global economic slowdown that saw stagnation of economic growth and consumer activity, the COVID-19 lockdowns and other precautions taken in early 2020 drove the global economy into crisis.

    • Overview
    • Narratives
    • Housing Market
    • Risk-Taking Behavior
    • Excessive Private Debt Levels
    • Financial Market Factors
    • Governmental Policies
    • Capital Market Pressures
    • Boom and Collapse of The Shadow Banking System
    • Mortgage Compensation Model, Executive Pay and Bonuses

    The immediate or proximate cause of the crisis in 2008 was the failure or risk of failure at major financial institutions globally, starting with the rescue of investment bank Bear Stearns in March 2008 and the failure of Lehman Brothersin September 2008. Many of these institutions had invested in risky securities that lost much or all of their value when U.S. and European housing bubbles began to deflate during the 2007-2009 period, depending on the country. Further, many institutions had become dependent on short-term (overnight) funding markets subject to disruption. Many institutions lowered credit standards to continue feeding the global demand for mortgage securities, generating huge profits that their investors shared. They also shared the risk. When the bubbles developed, household debt levels rose sharply after the year 2000 globally. Households became dependent on being able to refinance their mortgages. Further, U.S. households often had adjustable rate mortgages, which h...

    There are several "narratives" attempting to place the causes of the crisis into context, with overlapping elements. Five such narratives include: 1. There was the equivalent of a bank run on the shadow banking system, which includes investment banks and other non-depository financial entities. This system had grown to rival the depository system in scale yet was not subject to the same regulatory safeguards. 2. The economy was being driven by a housing bubble. When it burst, private residential investment (i.e., housing construction) fell by nearly 4%. GDP and consumption enabled by bubble-generated housing wealth also slowed. This created a gap in annual demand (GDP) of nearly $1 trillion. Government was unwilling to make up for this private sector shortfall. 3. Record levels of household debt accumulated in the decades preceding the crisis resulted in a "balance sheet recession" once housing prices began falling in 2006. Consumers began paying down debt, which reduces their consu...

    The U.S. housing bubble and foreclosures

    Between 1997 and 2006, the price of the typical American house increased by 124%. During the two decades ending in 2001, the national median home price ranged from 2.9 to 3.1 times median household income. This ratio rose to 4.0 in 2004, and 4.6 in 2006. This housing bubble resulted in quite a few homeowners refinancing their homes at lower interest rates, or financing consumer spending by taking out second mortgagessecured by the price appreciation. By September 2008, average U.S. housing pr...

    Subprime lending

    In addition to easy credit conditions, there is evidence that both competitive pressures and some government regulations contributed to an increase in the amount of subprime lending during the years preceding the crisis. Major U.S. investment banks and, to a lesser extent, government-sponsored enterprises like Fannie Maeplayed an important role in the expansion of higher-risk lending. The term subprime refers to the credit quality of particular borrowers, who have weakened credit histories an...

    In a June 2009 speech, U.S. President Barack Obama argued that a "culture of irresponsibility" was an important cause of the crisis. He criticized executive compensation that "rewarded recklessness rather than responsibility" and Americans who bought homes "without accepting the responsibilities." He continued that there "was far too much debt and not nearly enough capital in the system. And a growing economy bred complacency." Excessive consumer housing debt was in turn caused by the mortgage-backed security, credit default swap, and collateralized debt obligation sub-sectors of the finance industry, which were offering irrationally low interest rates and irrationally high levels of approval to subprime mortgage consumers. Formulas for calculating aggregate risk were based on the gaussian copula which wrongly assumed that individual components of mortgages were independent. In fact the credit-worthiness of almost every new subprime mortgage was highly correlated with that of any ot...

    To counter the 2000 Stock Market Crash and subsequent economic slowdown, the Federal Reserve eased credit availability and drove interest rates down to lows not seen in many decades. These low interest rates facilitated the growth of debt at all levels of the economy, chief among them private debt to purchase more expensive housing. High levels of debt have long been recognized as a causative factor for recessions. Any debt default has the possibility of causing the lender to also default, if the lender is itself in a weak financial condition and has too much debt. This second default in turn can lead to still further defaults through a domino effect. The chances of these follow-up defaults is increased at high levels of debt. Attempts to prevent this domino effect by bailing out Wall Street lenders such as AIG, Fannie Mae, and Freddie Mac have had mixed success. The takeover is another example of attempts to stop the dominoes from falling.There was a real irony in the recent interv...

    In its "Declaration of the Summit on Financial Markets and the World Economy," dated 15 November 2008, leaders of the Group of 20cited the following causes related to features of the modern financial markets:

    Failure to regulate non-depository banking

    The Shadow banking system grew to exceed the size of the depository system, but was not subject to the same requirements and protections. Nobel laureate Paul Krugmandescribed the run on the shadow banking system as the "core of what happened" to cause the crisis. "As the shadow banking system expanded to rival or even surpass conventional banking in importance, politicians and government officials should have realized that they were re-creating the kind of financial vulnerability that made th...

    Affordable housing policies

    Critics of government policy argued that government lending programs were the main cause of the crisis. The Financial Crisis Inquiry Commission (report of the Democratic party majority) stated that Fannie Mae and Freddie Mac, government affordable housing policies, and the Community Reinvestment Act were not primary causes of the crisis. The Republicanmembers of the commission disagreed.

    Government deregulation as a cause

    In 1992, the Democratic-controlled 102nd Congress under the George H. W. Bushadministration weakened regulation of Fannie Mae and Freddie Mac with the goal of making available more money for the issuance of home loans. The Washington Post wrote: "Congress also wanted to free up money for Fannie Mae and Freddie Mac to buy mortgage loans and specified that the pair would be required to keep a much smaller share of their funds on hand than other financial institutions. Whereas banks that held $1...

    Private capital and the search for yield

    In a Peabody Award winning program, NPR correspondents argued that a "Giant Pool of Money" (represented by $70 trillion in worldwide fixed income investments) sought higher yields than those offered by U.S. Treasury bonds early in the decade, which were low due to low interest rates and trade deficits discussed above. Further, this pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income generating investments had not grown as fast. Investment ban...

    Significance of the parallel banking system

    In a June 2008 speech, U.S. Treasury Secretary Timothy Geithner, then President and CEO of the NY Federal Reserve Bank, placed significant blame for the freezing of credit markets on a "run" on the entities in the "parallel" banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls. Further, these entities were vulnerable because they borrowed short-term in...

    Run on the shadow banking system

    Nobel laureate and liberal political columnist Paul Krugman described the run on the shadow banking system as the "core of what happened" to cause the crisis. "As the shadow banking system expanded to rival or even surpass conventional banking in importance, politicians and government officials should have realized that they were re-creating the kind of financial vulnerability that made the Great Depression possible—and they should have responded by extending regulations and the financial saf...

    During the boom period, enormous fees were paid to those throughout the mortgage supply chain, from the mortgage broker selling the loans, to small banks that funded the brokers, to the giant investment banks behind them. Those originating loans were paid fees for selling them, regardless of how the loans performed. Default or credit risk was passed from mortgage originators to investors using various types of financial innovation. This became known as the "originate to distribute" model, as opposed to the traditional model where the bank originating the mortgage retained the credit risk. In effect, the mortgage originators were left with nothing at risk, giving rise to a moral hazardthat separated behavior and consequence. Economist Mark Zandi described moral hazard as a root cause of the subprime mortgage crisis. He wrote: "...the risks inherent in mortgage lending became so widely dispersed that no one was forced to worry about the quality of any single loan. As shaky mortgages w...

  6. The 1973–1975 recession or 1970s recession was a period of economic stagnation in much of the Western world during the 1970s, putting an end to the overall post–World War II economic expansion. It differed from many previous recessions by being a stagflation , where high unemployment and high inflation existed simultaneously.

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